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Should You Purchase or Lease a Commercial Property?

Jan 02, 2023
Should You Purchase or Lease a Commercial Property?

The decision of whether to buy or lease a commercial property is one that people often face especially when starting a business. Purchasing a commercial property means having expectations of earning money and making a regular income. The decision to buy or lease requires a lot of planning, analysis, and detailed orientation to understand the aspects of both sides. Although both pros and cons exist, making a decision that aligns with your needs is truly important.

This article will cap your idea and make it simple to understand whether you need to buy or lease a commercial property.

Purchasing A Commercial Property - Advantages

The value of a commercial property remains intact as long as it is maintained well. The advantages of purchasing a commercial property are mentioned below.

1. Potential for income generation:

A commercial property can generate income through rent or lease payments from tenants, providing a steady stream of revenue.

2. Control Of Property

When you purchase commercial property, you gain full control over it. You can determine what happens to the property in the future, who the buyers will be, and how you wish to put it to use. This is a crucial step, especially if you plan to conduct renovation activities. Additionally, if you purchase a property, you can be flexible with the business hours.

3. Tax Break

A tax benefit can be assessed if you purchase a commercial property. Moreover, if you opt for a loan to buy a property, there are high chances of availing of tax deductions for the interests that will be incurred on the EMI and property taxes.

4. Property Value Appreciation

Commercial properties may appreciate in value over time, potentially providing a good return on investment. It takes time for the property of the value to see a rise; however, it does happen over time. The property's value can increase due to the demographics or social infrastructure. In the long run, this can help you gather funds for accomplishing future goals. Moreover, the demand for commercial properties tends to be more stable than residential properties, as businesses typically have a more consistent need for space.

5. Mortgage During Need

If you buy a commercial property, it can be used as collateral or a mortgage with financial institutions. This can assist you at difficult times, especially when you need money. Financial institutions offer up to 70% of the property's value, which you can easily repay.

6. Diversification of investment portfolio:

Adding a commercial property to your investment portfolio can help diversify your holdings and potentially reduce risk.

Leasing A Commercial Property - Advantages

Here are the benefits of leasing a commercial property.

1. Cash Flow

To understand it from the cash flow perspective, a lease is a better option than a purchase. If your business has just kicked off, and the turn of events is building up the revenue systems, then it is best to lease. The only investments required when you lease a commercial property are a security deposit and monthly rent.

2. Availability

Finding a commercial property for lease is easy, especially when you are struggling with factors such as a low business credit score. Leasing a property is convenient even when you have a low CIBIL score.

3. Lower Maintenance

Start with leasing a commercial property either for a long-term or a short-term. This will depend entirely on the business requirement. Also, when you lease a property, all your funds are liquid since there isn't a lot of investment that falls through. These liquid funds can then be used to enhance other processes.

4. Declining Property Prices

There are chances that you will bear huge losses when you buy a property and the value of the property deteriorates. However, if you lease commercial property, which can have a declined value in the future, it will leave you with no impact.

5. Lower upfront costs:

Leasing a commercial property typically requires a lower upfront investment compared to purchasing a property, as it does not involve a down payment or closing costs.

6. Opportunity to test out a location:

Leasing a commercial property allows you to try out a location before committing to a long-term purchase, which can be beneficial if you are unsure about the viability of the location for your business.

Buying Vs Leasing Of Commercial Property

Given that you have enough cash, you can opt to buy a commercial property with a flexible down payment. Whether you wish to buy or lease is a decision you have to make, depending on your preferences.

Go for commercial property purchase if it works in your favor, and if resale and equity building interest you. Alternatively, buying a property is always a good idea if you wish to remain the sole decision maker of what happens to the plot. Depending solely on the business requirements, you can choose the best suitable property.

Before taking a decision to purchase a commercial property, keep a check on your financial capacity. Leasing is a considerable choice to make especially if you are moving to a brand-new area where your ideas about commercial properties are limited.


Getting a Commercial Property Loan from financial institutions like SMFG Grihashakti is easy as you can avail of a loan at affordable interest rates.

Go ahead and decide if buying or leasing a commercial property is more important. Either way, a Commercial Property Loan is there to back you up and take care of all your expenses.

Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.

SMFG India Home Finance Co. Ltd. (Formerly Fullerton India Home Finance Co. Ltd.)
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